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The Fed is a hawk this time! March rate hike plate nail gold can rebound for how long?

International spot gold on Thursday (February 1) Asian session early continued to hold steady at 1340The dollar/Above ounces, gold continued to come under pressure earlier on Wednesday as U.S. employment data from ADP boosted the dollar's rebound and U.S. bond yields were near four-year highs. Gold hit a new one-week low of $1,332.93 an ounce in New York as the federal reserve's hawkish policy statement, but then quickly pulled up nearly $15 in a v-shaped reversal that ended a two-day losing streak.

At its last monetary policy meeting Wednesday, chaired by Janet Yellen, the fed decided to holdThe benchmark rate was unchanged at , with inflationary pressures expected to continue to rise this year and the emphasis on plans to raise rates further, setting the tone for the march meeting chaired by the next chairman, colin Powell.

The federal open market committee said in a policy statement on Wednesday that it expected economic developments to support a further, gradual increase in the federal funds rate. The statement was worded "further" twice before.

The change in statements suggests that policymakers acknowledge stronger growth and are more confident that inflation will rise to the 2 per cent target. One of the most notable is, the committee said in a statement, "on the basis of 12 months, the overall rate of inflation and inflation excluding food and energy are continue to less than 2%", to eliminate the original expression about inflation rate fell in 2017, and this year, inflation is expected to rise, this may stimulate people's expectations of the federal reserve will speed up the rate hike.

Inflation has picked up slightly since mid-2017, but remains below the central bank's 2 per cent target. The fed's preferred price index, a measure of prices linked to consumer spending by the Commerce Department, rose 1.7% in December from a year earlier. Excluding volatile food and energy, inflation is 1.5 per cent.

In the wake of the fed's decision, futures on the federal funds rate showed a 94 per cent chance that the fed would raise rates in March, after the FOMC forecast 12-month inflation to rise and stabilise near the fed's 2 per cent target in 2018, compared with less than 62 per cent on December 29, 2017.

In terms of market conditions,The dollar indexAfter the decision, it fell nearly 20 points to 89.01, then rose in shock, reaching 89.30 on the new day. Spot gold, on the other hand, tumbled to a one-week low of $1,332.56 an ounce after the decision, but quickly rallied to nearly $15, hitting a session high of $1,347.51 in late New York trading.

Scott Buchta, head of fixed-income strategy at Brean Capital, wrote in the research paper that markets continue to underestimate the fed's 'willingness and desire' to raise rates steadily in the coming years as the economy improves. The full effect of the tax cuts will come in 2019.

Buchta said the market is now pricing in three rate increases this year and one next year. "We wouldn't be surprised" if the fed's long-term lattice rose in March.

Kathy Jones at Charles schwab said in an interview that investors may have underestimated the size of the changes that could occur with the new fed governors and that the fed was "very likely" to raise rates in March.

The FOMC has added some new members this year. The fed's 12 regional fed presidents take turns voting at policy meetings each year, with Cleveland fed President Loretta Mester, Richmond fed President Thomas Barkin, Atlanta fed President Raphael Bostic and San Francisco fed President John Williams becoming new voting members Wednesday. Balkin and bostic voted for the first time since taking office.

Separately, the FOMC said in a separate statement on Wednesday that Mr Powell had been elected chairman effective February 3. Mr. Powell, who will be sworn in on Feb. 5, has been supportive of Ms. Yellen's incremental approach. Mr Powell's economy grew at an annualised rate of 2.6% in the last quarter of last year, buoyed by strong business investment and consumer spending.

Avery Shenfeld, chief economist at CIBC, said in a note that the fed's incremental policy path is not expected to change even with a change in fed chair. The policy statement showed more confidence that inflation would reach 2 per cent, while the description of the economy remained largely unchanged, with a total of three expected interest rate rises in 2018.


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